Equity markets in Argentina and Türkiye could post returns of more than 20% this year, driven by policy reforms aimed at lowering inflation levels, financial giant J.P. Morgan said in a note earlier this week.
"Lifting of capital controls is a potential upside driver for Argentina," J.P. Morgan analysts said in a note on Tuesday, while adding that Türkiye's ongoing path to lower inflation and lower interest rates could bolster its equities.
Argentina's benchmark Merval stock index is trading at nine times its 12-month forward price-to-earnings (PE) ratio, while Türkiye's BIST 100 index trades at seven times, as per JPM estimates.
Both indexes are trading at a discount to the broader MSCI emerging markets index, whose PE ratio stands at 12.
Investors are doubling down on Argentina's stocks and bonds even as they hit records in 2024, as Javier Milei's government seeks to reduce inflation and eliminate capital controls that have been detrimental to business and investment.
J.P. Morgan expects the lifting of capital controls and the upcoming midterm elections in October to further support the region's equities.
In the last 12 months, Argentina's benchmark has risen 77% in dollar-denominated terms, the second-best global performance of 92 main equity markets, as per the U.S.-based giant's estimates.
Having upgraded Turkish equities to "overweight" from "neutral" last month, J.P. Morgan says falling inflation and the rate-cutting cycle could further help the broader stock market. In local currency terms, the BIST 100 index has risen about 8% in the last 12 months.
After interest rate cuts of 250 basis points each in December and January, the Turkish central bank's policy rate now stands at 45% and economists expect rates to be lowered to 30% by the end of the year, which is in line with JPM's forecasts.
The annual inflation meanwhile dropped to nearly 42% in January from the peak of around 75% last May.
J.P. Morgan favors Argentina's financials and energy sectors, while for Türkiye, the brokerage's top stock pick is food retailer BIM Birleşik Mağazalar A.Ş. but also favors Akbank, Turkish Airlines (THY) and food retailer Migros.
